A man smokes a large marijuana joint during the annual 4/20 marijuana celebration on Parliament Hill in Ottawa on April 20, 2018. With legalization ahead, provinces are taking different approaches in how they sell weed to the public.
THE CANADIAN PRESS/Justin Tang

Buying pot in Ontario in 2018 will be like buying booze in 1928

Author

Associate professor of operations research, Goodman School of Business, Brock University

Disclosure statement

Michael J. Armstrong does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

The legalization of cannabis in Canada is on the horizon. Canadian provinces are taking different approaches to how it will be sold to the public.

The Ontario Cannabis Retail Corporation (OCRC) grabbed attention in April for identifying its first store locations. But it was the accompanying call for product suppliers that caught my eye as a business professor. It hints at OCRC’s future relationships with cannabis growers and consumers.

Provincial approaches

Every province except Saskatchewan will use its liquor agency as the central distributor of recreational cannabis. The agencies will buy it from licensed growers and ship it to retailers. But each province will go its own way regarding how cannabis will be sold to consumers.

Meanwhile, eastern provinces will set up government-owned outlets. Nova Scotia will sell cannabis in nine liquor stores. Quebec’s liquor agency instead will set up dedicated stores. There will be at least four in Montreal.

Ontario likewise created OCRC as a liquor board subsidiary. But its cannabis stores will be separate from liquor outlets.

Suppliers wanted

OCRC’s call most notably indicated that it doesn’t have any confirmed suppliers yet. Growers had until May 2, 2018, to submit offers. OCRC hopes shipments could begin June 1. But that optimistically leaves just four weeks to negotiate contracts and schedule deliveries.

Speaking of prices, politicians have repeatedly mentioned needing a legalized cannabis price that’s competitive with black markets. But OCRC asks suppliers to suggest a retail price for each product. So there will be many prices, not just one.

Just as fine wine costs more than basic plonk, premium cannabis will cost more than entry-level weed. Consumers can choose how to trade off quality versus price. Meanwhile, growers can compete on price to capture larger market shares.

Product specifications

Suppliers must also quantify their products’ chemical ingredients. These include the percentage of high-inducing tetrahydrocannabinol (THC) and medically promising cannabidiol (CBD). All product shipments will require chemistry lab reports confirming those numbers.

Those requirements are a good start toward improving cannabis quality. They’ll help legal products develop reliable reputations with consumers and marketing advantages over street weed.

In effect, OCRC is reviving the procedures of liquor stores from 90 years past. This approach will make it tougher for legal growers to build brand reputations. That weakens their competitiveness with black markets.

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A woman lights up at Sunset Beach in Vancouver, B.C., last year on April 20. A new Calgary bylaw, meantime, bans the public consumption of cannabis and restricts people to smoking weed only at home, unfairly affecting those who rent.
THE CANADIAN PRESS/Darryl Dyck